It’s a home run, for redBus founder

“My parents were initially worried. They asked me why I was selling, if the company had run into debt.” Phanindra Sama, CEO, redBus.in

June 30, 2013:

“Actually, nothing much,” says a phlegmatic Phanindra Sama, when asked if the huge deal that his start-up venture just clinched has changed anything at all. “There is no change,” he says, even though the deal itself has set off a huge buzz in the start-up ecosystem in the country.

He admits that the whole start-up cycle – from an idea for a start-up to raising funds to becoming profitable to an exit – happened quite fast. But it wasn’t planned that way, he says. Phani’s company – Pilani Softlabs Pvt Ltd, which runs online bus ticketing firm redBus.in – was bought over last week by the Naspers group of South Africa, which owns e-commerce site ibibo.com, for an undisclosed amount.

Phani was not looking to exit. A few months back, he says, a couple of venture capital and private equity firms showed interest in investing in redBus. Phani was not exactly looking to raise funds then, but since he felt that they may be able to get a good deal, he and his CFO decided to discuss it with potential investors. It was at that time Naspers entered the picture. Ibibo said it would either like to acquire the company or invest in it.

This out-of-the-blue offer created a bit of a stir within redBus, since an exit was farthest from the minds of the promoters. Phani says the promoters always knew there would be an exit, but “we never thought that it would happen this early.” The management team looked at it from different perspectives and decided that ibibo’s offer was a good one – for the company, for the promoters and investors, and for the employees. “Instead of waiting for another good deal, we decided to go ahead. We don’t get exit opportunities every day in India,” says Phani.

redBus had raised about Rs 43 crore from three venture capital firms – Seedfund, Inventus Capital and Helion Ventures – over two rounds. Apart from the promoters – Phani and his co-founders Charan Padmaraju and Sudhakar Pasupunuri – the three VC firms have also sold their stake to Naspers.

Phani says the decision to sell was not that difficult. He points out that redBus raised money from VC firms when the promoters did not know too much about venture capitalists. “After one or two years, we became aware that we had to sell the company (at some time). At that time, it was a bit of a dilemma. So we were mentally prepared to exit, either through an IPO or a strategic sale,” he says.

The deal with Naspers, according to him, is attractive for various reasons. Naspers has agreed to let redBus remain an independent entity; in that sense it is not a merger. Two, because there is no merger, there is no risk to the company and it will not have to face problems of integration. If it were a merger, the promoters would have had second thoughts.

“Naspers is a good group, very mature and with a different worldview, which we thought was good. They exhibited a lot of knowledge sharing,” says Phani. He will continue to be the chief executive officer of redBus and the entire team remains on board. In that sense, he says, there has been no change in his life. What was his family’s reaction? “My wife is neutral (about the decision to sell),” says Phani, “but my parents were initially worried. They asked me why I was selling, if the company had problems of debt and other such things. But then when I clarified to them that it is a happy moment, they are fine.” redBus is expected to end 2012-13 (the accounts are yet to be finalised) with a turnover of about Rs 600 crore against Rs 330 crore in the previous year when it reported Rs 50 lakh as net profit, its first year of profit. The company started operations in August 2006. Phani sees no issues being an employee in the company he founded. “Even earlier, we were governed by a board. It is just that the board members have changed,” he adds. Does he have another business idea that he plans to pursue? Nothing for now, says Phani says. “I will continue doing this role. I liked them (Naspers) during my interaction. We are not exiting because I had another idea or something,” he clarifies.

His message from this deal for other entrepreneurs: Whenever any good deal comes by, take it.

XThese are paid-for links provided by Outbrain, and may or may not be relevant to the other content on this page. To find out more information about driving traffic to your content or to place this widget on your site, visit outbrain.com. You can read Outbrain's privacy and cookie policy here.